In the first couple of episodes of what is now a regular series, Garry Carter and Jacquie Mount discussed the latest COVID-19 related government announcements affecting businesses
Following on from the online coffee webinar, we received many questions and this article attempts to answer them by topic as far as we can at present. Please note that this is the detail as we understand it today (25 March 2020 and updated 27 March). All questions raised on software, the continuation of practices, etc will be dealt with separately. We would also like to thank all those who took part and sent in suggested answers, which have been incorporated here as appropriate. To avoid any incorrect information this article has been amended to give the latest information we have.
There are some questions that still need to be researched that cover those on Statutory Sick Pay and in isolation, those who are self-employed and the additional assistance that might be available (possibly due out this week) and help for charities. As soon as we have answers to these another article will be published.
Furloughed employees (UPDATED 27/03/2020)
Who is it for?
The scheme is aimed at businesses that cannot continue to afford to keep on employees as they have no work for them. It does not have to apply to all workers – selection can take place but be very careful about possible discrimination as employment law and rules still apply.
The start date for eligibility (UPDATED 27/03/2020)
HMRC issued details yesterday that confirms employees must have been on the payroll on 28 February 2020. Details can be found here.
Length of time (UPDATED 27/03/2020)
The period is a minimum of three weeks up to a maximum of 3 months - at present, the time runs to the end of June, but the Chancellor has said he will consider an extension if necessary.
How will the system work?
HMRC is designing a portal where employers can identify furloughed workers and the amount they are being paid. The Government will then reimburse up to 80% of the amount. This will not be available until at least the end of March, so it is likely to be quite a way into April before grants are made. There must be some form of checking process, but we have not heard anything about how it will work.
What's the amount? (UPDATED 27/03/20)
The maximum is 80% of gross pay up to a maximum of £2,500 per month per employee. If the employee earns less than this, then it is based on their gross pay. he guidance now confirms that the 80% will be based on normal wage (so including overtime if this is reg/lar) but not fees, commission or bonuses. The Government is also paying the Employer's NICs and the minimum pension contribution over and above the wage. This gives a maximum cap of £2,500 + £245 (employers’ NIC) + £59 (auto-enrolled pension contribution) = £2,804 of total possible grant. This gives a maximum cap of £2,500 + £245 (employers’ NIC) + £59 (auto-enrolled pension contribution) = £2,804 of total possible grant that can be applied per employee per month.
So the employer can pay 80% to the employee in full. The employer can then claim for the higher of either:
- The amount earned in the same month last year
- The average monthly earnings from the last year
Payroll changes
Some information states you must set up a ‘furloughed worker’ status in the payroll but we have no details on this as yet.
Zero contract hours (UPDATED 20/03/20)
The calculation will be based on the average amount of hours worked since the start.
Will the grants be taxable?
We haven't had any information on this yet. Further information will likely be available later. For now, we would suggest you process payroll as usual and enter any grants as just that – a grant in its own account. For limited companies, the grant is to be treated as per grants under FRS102 Section 24.
Do I have to pay the full 100%?
The payroll is different from the grant as it is up to the employer how much they are paying furloughed workers, but employment law needs to be considered. Employers do not need to top up the 80% grant to 100% of their normal gross pay.
How do I notify my employees that they are being furloughed?
This is a matter for discussion as it is still covered by employment law. The ACAS website has a link to the type of information that needs to be put in writing.
Single director companies
Although no specific information has been given for such businesses, if a director is taking a salary then they can only apply for the 80% grant if they furlough themselves and hence not work. However, company law may kick in here as to the necessity to have at least one director. Also, the business needs to check the law on paying wages if they are non-viable under company law.
Previously laid off staff
If a business has already laid off its staff due to lack of work then they can take them back on and claim the 80% backdated to 1 March. However, there needs to be an intention that they would have been taken on again later anyway for this to be applied which might cause some controversy at some stage.
Transfer from SSP to furloughed worker
There isn’t any definitive information on this area, but looking at this logically from a payroll perspective, if the employee is virus-free after the two weeks and returns to work, then they must provide the necessary return to work fit note (which can be obtained from the NHS111 site). This means that they are then ready to work and can be furloughed if there is not any work available. If, however, they are not fit for work, then they shouldn't return to work and it is unlikely they can be furloughed. This means that the business would officially have to pay SSP which is not refundable (at present) past the first 14 days. This is, however, purely speculation and more information is needed on this before we can be more specific.
There has been no sign of the increase in minimum wage due on 1 April has been deferred, so assume it will go ahead. Furloughed wages though, will be based on earnings around Feb so may not be applicable for many that are not working.
These must continue as normal – information from the Pension Regulator states that all employer duties are still in force.
It is now clear that quarterly VAT returns that ended on 31 January fall under the standard system and payments should have been made by 7 March 2020. For VAT quarters that ended in February, the VAT return should be submitted by the due date, but payment can be deferred. The same applies to March, April, and May return.
As we have not been advised to the contrary, monthly VAT returns should still be submitted as normal but payments due from 30 March have been deferred.
All deferred VAT payments must be cleared by the end of the next tax year (5 April 2021).
The government has said it will not take direct debits that are due, but there is a question on whether businesses should cancel their direct debits mandates. HMRC should not take anything, but and some members on the chat line suggested cancelling DDs and setting up again later.
No information has been given about the payment of PAYE, NICs and CIS deductions but it is thought that these will still need to be paid. PAYE and NICs are taken from gross pay and the net pay passed to employees. The Government is paying 80% of gross so it follows that tax and NICs should be paid to HMRC. If CIS payments are made and the tax is deducted, then this should still be paid to HMRC as it is your sub-contractor’s contribution to their annual tax bill and not the contractor’s money.
The July 2020 payment on account if relevant has been deferred until the final balancing payment in January 2021. This will also apply to any directors of companies who are taking dividends as this is still a part of their personal tax returns.
No information has been issued yet on whether the payment of Corporation Tax can be deferred. There is information already regarding asking for a delay in reporting to Companies House, but this application must be done before the deadline for submission, otherwise, penalties are still likely to be implemented.
Business interruption loans
The loans have been open for application since 23 March. Information on this can be found here. The business must still pay back the loan and it is only if they default that the government will guarantee 80% of this payable to the bank. If the business defaults, then normal liquidation rules will probably kick in and directors may be asked to give personal guarantees.
